Posts Tagged: bear market

20 Trading Insights from Paul Tudor Jones

26 September 2013 - 15:35 pm
 

paultudor1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

2. I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?

4. These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates an illusion that there is an explanation for everything and that the primary test is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.

5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

6. Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

7. That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’

8. If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

9. Losers average down losers

10. The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s? >> Read More

Lessons From John Templeton

17 September 2013 - 13:28 pm
 

1. “I never ask if the market is going to go up or down, because I don’t know, and besides it doesn’t matter. I search nation after nation for stocks, asking: Where is the one that is lowest priced in relation to what I believe its worth?” Like every other great investor in this series of blog posts John did do not make bets based on macroeconomic predictions. What some talking head may say about markets as a whole going up or down was simply not relevant in his investing.  John focused on companies and not macro markets. He was a staunch value investor who once said: “The best book ever written [was Security Analysis by Benjamin Graham].

 2. “If you want to have a better performance than the crowd, you must do things differently from the crowd.  I’ve found my results for investment clients were far better here [in the Bahamas] than when I had my office in 30 Rockefeller Plaza.  When you’re in Manhattan, it’s much more difficult to go opposite the crowd.”  The mathematics of investing dictate that investing with the crowd means you will earn zero alpha, because the crowd is the market.  You must sometimes be willing to take a position that is different from the crowd and be right about that position, to earn alpha. John put it this way: “If you buy the same securities everyone else is buying, you will have the same results as everyone else.” 

 3. “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.  Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.  People are always asking me: where is the outlook good, but that’s the wrong question…. The right question is: Where is the outlook the most miserable? For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity.”   To be able to sell when people are most pessimistic requires courage.  Being courageous is easier if you are making bets with “house money.” Making bets with the rent money is always unwise.  Templeton believed problems create opportunity. For example, it was on the day that Germany invaded Poland that he saw one of his best buying opportunities since prices were so low and values so high.  Simply telling his broker that day to buy every stock selling under $1 yielded a 4X return for John.  >> Read More

Five key for profitable trading

29 August 2013 - 10:25 am
 

There are five key things that make all the difference in profitable trading:

Focus on a system with bigger wins than losses, big wins makes robustness a much easier thing to find. A 1:3 risk/return ratio makes it much easier to be profitable even with more losses than wins.

Trade in the direction of the trend, in my experience buying dips in a bull market and selling into strength in a bear market is a much easier process than calling tops and catching falling knives.

Trade small versus your buying power, most systems fail because traders simple trade too big causing losses and being wrong to set them back far too much. Small losses are easy to come back from a string of big losses is fatal.

Trade price action not opinions. Be quick to cut losses and patient to ride winners. Getting stuck on what you think should happen could be fatal when the market disagrees with you.

Your goal as a trader is to find an edge over the 90% of traders that lose money, once you have that edge the more you trade the right signals the better chance you have of being profitable. Before you have an edge the volume of trades work against you as your luck runs out. 

 

Gold first entered a bear market in April, and the recent rout has seen the precious metal break below the $1,200 level this week.GOLD-MELTING-ASR

 Adam Grimes, CIO at Waverly Advisors told Business Insider that market participants have stop orders beyond visible support points in the market.

“[The sell off in mid-April] was quite likely driven by a cluster of these orders, and we believe that more are probably lurking lower,” he said.

A stop order is an order to sell a position if price fall to a certain level.

Here’s more from our conversation with Grimes. >> Read More

Roubini Attacks The Gold Bugs

14 June 2013 - 10:55 am
 

Submitted by Detlev Schlichter of DetlevSchlichter.com,

Earlier this month, in an article for “Project Syndicate” famous American economist Nouriel Roubini joined the chorus of those who declare that the multi-year run up in the gold price was just an almighty bubble, that that bubble has now popped and that it will continue to deflate. Gold is now in a bear market, a multi-year bear market, and Roubini gives six reasons (he himself helpfully counts them down for us) for why gold is a bad investment. Roubini does not quite go so far as to tell his readers that there is no role whatsoever for the yellow metal. Investors should have a “very modest” share of gold in their portfolios, as a hedge against extreme risks, which, the good professor assures us, are almost so negligibly small that they are “irrational fears”, really, but beyond that there is little reason to bother with gold.

Interestingly, “very modest” is indeed a good description of gold’s share in the global asset mix. According to some studies gold accounts for only around 1 percent of global asset holdings. In terms of asset breakdown we already are where Roubini thinks we should be. So why bother? Those of us – such as yours truly – who hold a more pessimistic outlook as to the efficiency of current policies and the sustainability of the current monetary infrastructure, and who accordingly hold a bigger share of their wealth in gold, are evidently “paranoid”, and as they now reap the deserved reward for their dreadful negativity courtesy of a declining gold price, why not ignore them? It is, after all, a tiny minority. But it is evident from Roubini’s essay that he not only considers the gold bugs to be wrong and foolish, they also annoy him profoundly. They anger him. Why? – Because he thinks they also have a “political agenda”. Gold bugs are destructive. They are misguided and even dangerous people.

Roubini’s case against gold

But let’s first look at his arguments for a continued bear market in gold. They range, in my view, from the indisputably accurate to the questionable and contradictory to the simply false and outright bizarre. Here is the list (with some of my commentary. Apologies to Professor Roubini.): >> Read More

50 Trading Rules

27 May 2013 - 16:10 pm
 

1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don’t take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.
11. Limit your losses – use stops!
12. Never cancel a stop loss order after you have placed it!
13. Place the stop at the time you make your trade.
14. Never get into the market because you are anxious because of waiting.
15. Avoid getting in or out of the market too often.
16. Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
17. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
18. Always discipline yourself by following a pre-determined set of rules.
19. Remember that a bear market will give back in one month what a bull market has taken three months to build.
20. Don’t ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
21. You must have a program, you must know your program, and you must follow your program.
22. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
23. Split your profits right down the middle and never risk more than 50% of them again in the market.
24. The key to successful trading is knowing yourself and your stress point. >> Read More

 

Trend Follower“Trend  followers use reactive technical analysis. Instead of trying to predict a market direction, their strategy is to react to the market’s movements whenever they occur. This enables them to focus on the market’s actual moves and not get emotionally involved with trying to predict direction or duration.” -Michael Covel/ Trend Following

You Might be a Trend Following Trader if…..

  1. …you love buying break outs above resistance and new all time highs.
  2. …big trends make you happy not angry.
  3. …you do not trade the concept of something being overbought you just use a trailing stop.
  4. …your trading decisions are based on what is happening now, not your opinions, your fears of what will happen, or your hopes of what will happen later.
  5. …you risk a little capital over and over again to make a lot of capital eventually.
  6. …you are great at letting your winners run.
  7. …trend followers don’t need a story they follow actual price action.
  8. …you look for longs in a bull market and shorts in a bear market you are likely a trend follower.
  9. …higher highs and higher lows are one of your best indicators to go long.
 

The following article is an excerpt from Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market by Mark Minervini with permission from McGraw Hill Publishing.

How to Handle a Losing Streak

A losing streak usually means it’s time for an assessment. If you find yourself getting stopped out of your positions over and over, there can only be two things wrong:

1. Your stock selection criteria are flawed.

2. The general market environment is hostile.

Broad losses across your portfolio after a winning record could signal an approaching correction in a bull market or the advent of a bear market. Leading stocks often break down before the general market declines. If you’re using sound criteria with regard to fundamentals and timing, your stock picks should work for you, but if the market is entering a correction or a bear market, even good selection criteria can show poor results. It’s not time to buy; it’s time to sell or even possibly go short. Keep yourself in tune with your portfolio, and when you start experiencing abnormal behavior, watch out. Jesse Livermore said, “I’m never afraid of normal behavior but abnormal behavior.” >> Read More

 

Gold prices are down about 12.5% since the start of April. But global central banks have been increasing their reserves of the yellow metal.

 GOLD-BAR

A new report from the World Gold Council shows that central banks bout 109 tonnes of gold in the first quarter.

This was the seventh straight quarter in which they purchased over 100 tonnes of gold.

Central banks held 31,735.4 tonnes of gold as of May 2013. This was up from 31,694.8 tonnes as of April 2013.

Gold entered a bear market during that quarter.  In the current quarter, gold has gone from $1,603 on April 1 to below $1,400 today.

According to the WGC, Russia and South Korea were among the biggest buyers of gold. >> Read More

The Secret to Trading Success

13 May 2013 - 15:40 pm
 

secret1The most important thing you must learn in every market cycle  is where the money is flowing. It is flowing into the companies where the earnings are growing. As long as mutual funds have capital in flows instead of net out flows then they must put new money to work investing in stocks. If you want to make your job as a trader much easier then find where the flow is going. Mutual fund managers can not go to an all cash position they can only move money around. A bear market sinks most stocks because managers have to sell everything to raise money to redeem shares. In an uptrend they have to buy stocks with the incoming money flows. Where does this money go? It goes into the sectors and stocks that are in favor due to increased earnings in a sector and individual stocks that are dominating their sector and changing the world in the process. You want the leaders not the has been. You want the best the market has to offer. Where are consumers dollars flowing into? That is where the money is going. What companies have the best growth prospects? The stock can only grow in price if the underlying company does. Mutual fund managers are the biggest customers in the market when they start buying a stock that increases huge demand and price support.

Your job is to follow the big money, shorting in bear markets, going long in bull markets. Following the trend of what is in favor. Do not fight the action, flow with it.

Quit having opinions and start being a detective looking for the smart money, the fast money, the big money and where it is going now.

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Our site is objectively in letter and spirit, based on pure Technical Analysis. All other content(s), viz., International News, Indian Business News, Investment Psychology, Cartoons, Caricatures, etc are all to give additional ambiance and make the reader more enlightening. As the markets are super dynamic by very nature, you are assumed to be exercising discretion and constraint as per your emotional, financial and other resources. This blog will never ever create rumors or have any intention for bad propaganda. We report rumors and hear-say but never create the same. This is for your information and assessment. For more information please read our Risk Disclaimer and Terms of Use.

Technically Yours,
Team ASR,
Baroda, India.